Most stakeholders agree the state needs more renewables, but
they don’t agree on how to get there.
Arizona's politics over renewable energy have always been
contentious. As the state considers adding new targets, this year is no
different.
There are two proposals to increase Arizona’s renewable
portfolio standard. One, a ballot initiative, would add a 50 percent renewable
energy mandate (sans nuclear) by 2030 to the state’s constitution. The
other, proposed separately by a member of the Arizona Corporation
Commission (ACC), would increase the state’s renewable portfolio standard to 80
percent (including nuclear) by 2050.
Arizona
Public Service Company (APS), which services 1.2 million Arizonans in
11 of the state’s 15 counties, favors the ACC initiative and says the ballot
measure would reduce its ability to choose the resources best suited to its
customers. Ballot initiative supporters say the utility’s reliance on natural
gas makes little sense in a state with copious solar resources. Commissioner
Andy Tobin, the ACC member that introduced the initiative, contends his plan is
an achievable way to modernize the state’s energy system.
All the parties are wrestling with what Arizona’s future
should look like, and whether that future should be guided by utilities and
regulators, voters and consumers, or all of the above.
“Through all the discussion that we’ve had, it’s important
that we take a collaborative approach to all the energy decisions we make,”
said Jeff Burke, director of resource planning at APS. “It’s not a good policy
to say: Here’s the plan, here’s the only way you can plan your energy system.
You have to have a much more broad view.”
Next week, commissioners will consider energy standards in a
meeting where increasing the state’s target could come up. Meanwhile, a challenge to the ballot initiative is working its way
through state court. Arizona hasn’t increased its RPS of 15 percent renewables
by 2025 since 2006.
Dollars and cents
Part of the controversy stems from disagreements about what
exactly the ballot initiative would even mean for Arizonans.
According to Burke, meeting the new RPS would require 3,200
megawatts of utility-scale renewables: 2,400 megawatts of solar and 800
megawatts of wind. APS also expects an additional 3,000 megawatts of rooftop
solar.
In addition to the clean energy that it adds to the grid,
APS estimates it would need to retire 2,500 megawatts of baseload resources.
That includes the Palo Verde Nuclear Plant, the country’s largest nuclear
facility and one of the cheapest to run.
Altogether, the utility said the capacity changes would
double rates and add more than $1,000 to the average ratepayer’s bill over the
course of the year. Tucson Electric Power hasn’t taken a stance on the
initiative, but said it could add a total of over $500 to customer bills annually.
Conversely, a study from the Natural Resources Defense Council and
consulting firm ICF found that a high renewables future would decrease
electricity bills for the average Arizonan by $3 per month in 2030. The study
quantified total electricity system cost savings at $4 billion between 2020 and
2040.
Another analysis conducted by Dr. Wesley Herche at Arizona
State University looked at state renewable portfolio standards created between
2005 and 2012 and found no correlation between a higher RPS and utility rates.
He noted that in some cases states that achieved a higher standard saw lower
rates.
A separate assessment from NRDC and ICF also found that
Palo Verde would stay open, and Arizonans could absorb its capacity, with a 50
percent RPS or in a situation where APS relies on expanded gas generation.
Burke called NRDC’s analysis “insufficient” and said it was
based on “bad assumptions.”
“From a reliability perspective, they don’t have enough
megawatts to keep the lights on in Arizona,” he said. “The way I look at this
study — this is an impending blackout.”
NRDC’s analysis includes 9.26 gigawatts of capacity under
the RPS, though it doesn’t quantify capacity from demand response and energy
storage, while APS’ 2017 plan calls for just over 13 gigawatts in 2032.
A legal analysis prepared for Clean Energy for a Healthy
Arizona and conducted by attorney Sam Walsh, formerly of DOE, also assessed a
possible Palo Verde closure tied to the ballot initiative. Walsh noted that APS
would need agreement from the plant’s other owners and the eventual OK from the
ACC.
He added that closing Palo Verde doesn’t make sense because
it’s a cheap plant that produces zero-carbon resources.
“If we are going to meet climate goals, we’re going to need
both renewables and nuclear, and we should be wary of anyone who’s arguing that
we’re going to have to choose,” said Walsh. “The reality is, in many places in
the country we’re going to need both.”
A power struggle across state lines
The contentious RPS discussions indicate there’s still much
disagreement about how fast a clean energy transition should happen, and who
should control it.
The decision impacts more than Arizona. The fight has become
a Western one, with political and environmental stakeholders joining sides that
cross state lines.
Tom Steyer, the billionaire founder of NextGen America and
progressive Californian, has thrown nearly $4* million toward supporting the initiative.
“We think that’s noteworthy for Arizona voters,” said Matt Benson,
a spokesperson for a group opposing the initiative called Arizonans for
Affordable Electricity, which is funded by APS’ parent company. “He is not
going to have to live with the consequences of the law.”
The “forced closure” of Palo Verde further complicates the
RPS discussions. While APS is the operating agent and majority owner of the
plant, seven other utilities and load-serving entities across the West rely on
its power.
One owner, Southern California Edison, said it has no
position on the closure. Arizona’s Salt River Project, which gets 18 percent of
its generation from “sustainable resources” including renewables, hydro and
energy efficiency and would not be subject to the new initiative, referred
Greentech Media to APS.
The other owners — including El Paso Electric Company,
Public Service Company of New Mexico, Southern California Public Power
Authority and the Department of Water and Power of the City of Los Angeles —
did not return request for comment. APS said it isn’t at liberty to answer
whether it had discussed the closure with other owners.
APS contends a constitutional change is a misplaced attempt
to reconsider the RPS. Burke said the ballot initiative is “bad policy” that
doesn’t adequately consider the needs of customers.
“It makes no sense to have that type of mandate inside the
constitution,” said Burke. “That is not the right place to do it. The right
place to do it is with the stakeholders.”
The utility has encouraged the commission to move forward
with Tobin’s plan, as it offers a longer timeline and more flexible ways to
meet the goal, like nuclear generation. Burke said APS believes the ACC should
be involved in deciding the energy mix over a change to the state constitution.
“This is far better than a mandated energy policy derived
outside of any regulatory process that would be inflexible as technologies and
customer expectations evolve,” the utility said in a statement. “We believe the
best possible solutions are crafted through collaboration with our customers,
regulators and other stakeholders, including business and community leaders.”
But ballot initiative supporters contend that the majority
of Arizonans support more renewables, and so a vote to increase the RPS makes
sense. A recent poll found that 75 percent of Arizona voters
want to prioritize solar energy in the next decade.
“APS spends a lot of money talking about renewable energy,”
said DJ Quinlan, a spokesperson for Clean Energy for Healthy Arizona. “But when
you actually look at their plan…they really don’t have a lot of investment
planned in renewable energy.”
In a July letter to fellow commissioners, Commissioner Boyd
Dunn asked staff to open a rulemaking docket to “further explore, develop, and
propose possible revisions to our Renewable Energy Standard and Tariff rules.”
Dunn suggested Tobin’s plan would be considered under that docket, indicating
the commission too is seriously considering a changed RPS and wants a hand in
the decision.
In March, the commission also froze new
gas development above 150 megawatts for nine months.
APS’ current portfolio includes 12 percent renewables and 25
percent nuclear, adding to a total of 37 percent clean energy — depending on
how you define it. Its latest integrated resource plan, from 2017, calls for an
additional 5,387 megawatts of natural gas, 183 megawatts of renewable energy,
and 397 megawatts of energy storage. By 2032 it projects 18 percent of its
generation will come from renewables and 17 percent from nuclear.
Burke said the current IRP represents a “snapshot in time”
and could change based on the economics of certain technologies. He declined to
offer a preferred renewables target and noted “the mix is getting cleaner all
the time.”
But Walsh suggested APS’ opposition could stem from a
greater disinterest in significantly altering its IRP.
“This ballot measure is inconsistent with that plan,” Walsh
said, referencing the megawatts of gas included in the plan. “That seems like a
powerful fact.”
Moving forward
While opposing the ballot initiative, APS is moving forward
on a variety of clean energy programs. Burke points to initiatives like
its partnership
with First Solar on a 15-year solar-plus-storage PPA.
“To the extent that we can add resources that are clean and
make sense, we want to do that,” said Burke. “What we want to do is make sure
that folks can afford electricity, that they can use air conditioning in the
desert, and that they have reliable service. We also want to make sure we’re
moving forward on clean energy.”
The First Solar deal emerged from an RFP requesting bids for
summer power delivery only between 3 p.m. and 8 p.m. Eran Mahrer, First Solar’s
vice president of markets, origination and government affairs, said APS’
strategy of asking for a need is a “good step forward” for clean energy in
Arizona. The project is slated to come online in 2021.
“Whether you believe in incremental gas, whether you believe
in the transition of Arizona, APS has done something quite thoughtful at a bare
minimum,” said Mahrer.
APS opened another RFP for peaking capacity in April and one
specifically for battery storage in June. Burke said those should be tied up by
late 2018 or early next year.
As further measures of the utility’s commitment to
innovation, he pointed to initiatives like a program that offers solar and a
$30 bill credit to low-income homeowners and a project consisting of two
4-megawatt-hour batteries that replaced transmission and distribution upgrades
in a rural area northeast of Phoenix.
Though Mahrer recognized a maturation and evolution in
utilities' approaches to solar, he thinks more could be done to utilize the
technology for essential grid services.
“We need to have a good understanding of what the
capabilities of solar resources are, and then we need to have thoughtful
procurement that engenders that outcome,” he said. “Thinking through Arizona
specifically, assets that are contracted in a manner that embraces that
flexibility would allow considerably more solar to go in Arizona...that could
meet some of the peak demands that APS and other Arizona utilities have. It
won’t fully meet it, but it will certainly meet portions of it
cost-effectively.”
*This number has been corrected to reflect the latest
financial disclosures.
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